Revised: Aug. 30, 2010 - Subject to minor updates during the term.
AEC 855: Agricultural Production Economics Syllabus, Fall 2010 Scott Swinton and Roy Black, Instructors Catalog description: Analysis of agricultural production economic models, using econometrics, mathematical programming, and simulation. Introduction to the systems science perspective. Techniques for analysis of risk, environmental value, technological change, and technology adoption. Prerequisites: EC 801, EC 805, and either AEC 835 or EC 820B or permission of instructor. Meeting times: Fall term, Tuesday and Thursday 8:30 - 9:50 AM (119B Berkey Hall) Prof. Scott M. Swinton 304 Agriculture Hall Phone: 353-7218
[email protected]
Prof. J. Roy Black 305 Agriculture Hall Phone: 353-9649
[email protected]
Office hours by appointment.
Office hours by appointment.
Recommended preparation: EC/AEC 801 - Mathematical Applications in Economics (or equivalent) EC/AEC 805 - Microeconomic Analysis (or equivalent) EC 820B or AEC 835 or equivalent applied econometrics course (AEC 851 - Agribusiness Operations Management, would be complementary for discussions of budgeting, linear programming, and stochastic simulation) Objectives for the course 1. Help students link analytical applications with production economics research questions. 2. Provide experience in the economic analysis of production data. 3. Encourage direct student participation in classroom teaching and learning. Desired outcomes of the course: 1. Given a problem in agricultural production economics, students will be able to identify an appropriate theoretical framework, a suitable analytical method, and undertake an informed empirical analysis. 2. Students will master the key concepts of production economics, including input-output models, input-input models, output-output models, cost functions, input demand and output supply.
2 3. Students will have a good general understanding of agricultural production functions, cost and profit functions, math programming models, and non-optimizing simulation models. Course grading: Data analysis assignments (4) 30% Class discussion and preparation 10% Term project 30% Final exam 30% Recommended texts: Debertin, David L. 1992. Agricultural Production Economics. 2nd edition, privately published. (Online version http://www.uky.edu/~deberti/prod/AgprodCD2007/ requires WordPerfect for math fonts to view correctly). Beattie, Bruce R., C. Robert Taylor and Myles J. Watts. 2009. The Economics of Production. 2nd ed. Malabar, FL: Krieger. Baum, Christopher F. 2006. An Introduction to Modern Econometrics Using Stata. College Station, TX: Stata Press. Background text: Nicholson, Water and Christopher Snyder. 2008. Microeconomic Theory: Basic Principles and Extensions. 10th ed. Thompson/South-Western. In the syllabus, SMS = taught by Dr. Swinton; JRB = taught by Dr. Black. Where possible, readings or web links are available on the course ANGEL website. In the readings listed below, * = Required reading (J) = accessible online via JSTOR (http://www.jstor.org/). Supplementary readings (http://www.msu.edu/course/aec/855/sup855.pdf) offer greater depth in the topic areas addressed in the course.
3 AEC 855 Course Outline and Reading Assignments Agricultural Systems & Models (SMS)
Agricultural production systems and production economics (9/2, 9/7) * Swinton, S.M. and J.R. Black, “Modeling of Agricultural Systems.” J-Ph. Colin & E. Crawford, eds, Research on Agricultural Systems: Accomplishments, Perspectives and Issues, Comack, NY: Nova Science Publishers, 2000. (http://agecon.lib.umn.edu/cgi-bin/pdf_view.pl?paperid=1944) * Wright, A. "Farming Systems, Models and Simulation." In J.B. Dent and J.R. Anderson, eds., Systems Analysis in Agricultural Management, Sydney: Wiley, 1971. Pages 17-33. * Dalton, G. E. Managing Agricultural Systems. London: Applied Science, 1982. Pages 20-30, 77-85. Weersink, A., S. Jeffrey, and D. J. Pannell. "Farm-Level Modeling for Bigger Issues." Review of Agricultural Economics 24(Spring/Summer, 2002):123-140. (J) Nolan, J., D. Parker, G. C. Van Kooten, and T. Berger. "An Overview of Computational Modeling in Agricultural and Resource Economics." Canadian Journal of Agricultural Economics 57(2009):417-429.
Discussion (9/7): Simulation approaches to yield response * Flinn, J.C. (1971). "The Simulation of Crop-Irrigation Systems." In J.B. Dent and J.R. Anderson, eds., Systems Analysis in Agricultural Management, Sydney: Wiley Pages 123-151. * Zhang, W., and S. M. Swinton (2009). "Incorporating Natural Enemies in an Economic Threshold for Dynamically Optimal Pest Management." Ecological Modelling 220:1315-1324. Isaacs, R., A. Kirk, N. Walton, and G. DeGrandi-Hoffman (2009) “A Deterministic Model of Highbush Blueberry Pollination: the Role of Honey Bee Investment and Weather Conditions During Bloom.” Unpublished manuscript. MSU Dept of Entomology. Parsch, L. D., M. J. Cochran, K. L. Trice, and H. D. Scott (1991). "Biophysical Simulation of Wheat and Soybean to Assess the Impact of Timeliness on Double-Cropping Economics". In J. Hanks, and J. T. Ritchie, ed., Modeling Plant and Soil Systems. Madison, WI: American Society of Agronomy, pp. 511-534.
4 Review of Production Economics Concepts (SMS) Output of one product with one input (9/9) * Debertin, Chaps. 2-3 * Beattie & Taylor, Chap. 1, Chap. 2, pp. 10-19 (Nicholson & Snyder, pp. 295-298.) Assignment 1 (9/9): Production function estimation (due 9/23)
Visiting speaker: John Antle (9/14): Linking biophysical simulation & economic decision models. Antle, J.M., J.J. Stoorvogel and R. Validivia (2009). “Designing Econometric-Process Models for Semi-Subsistence Agricultural Systems: Analysis of Poverty-Sustainability Tradeoffs in Machakos, Kenya.”
Output of one product with two inputs (9/16) * Debertin, Chaps. 5-6. * Beattie & Taylor, Chap. 2, pp. 19-67. (Nicholson & Snyder, pp. 298-306; 374-381.)
Planning term project (9/21) (due 10/21) (See instructions on ANGEL.)
Wooldridge, J.M. Introductory Econometrics: A Modern Approach, 4th ed. Thomson SouthWestern, 2008. Chap. 19, “Carrying Out an Empirical Project.”
Multiple products, joint products, production possibilities frontiers (9/21) * Debertin, Chaps. 15-16. (Nicholson & Snyder, pp. 445-449.)
Discussion: Alternative approaches to joint product analysis (9/23) * Traxler, Greg and Derek Byerlee. "A Joint-Product Analysis of the Adoption of Modern Cereal Varieties in Developing Countries." American Journal of Agricultural Economics 75(1993): 981-989. (J)
5 * Lichtenstein, M. E., and C. A. Montgomery. 2003. "Biodiversity and Timber in the Coast Range of Oregon: Inside the Production Possibility Frontier." Land Economics 79(2003):56-73. (J) Functional Form & Model Specification (SMS)
Introduction to production function forms (9/28) * Debertin, Chaps. 10-11, 24.
* Beattie & Taylor, pp. 74-80. * Griffin, Ronald C., John M. Montgomery, and M. Edward Rister. "Selecting Functional Form in Production Function Analysis." Western Journal of Agricultural Economics12(December 1987): 216-227. (http://purl.umn.edu/32240) (Nicholson & Snyder, pp. 306-311; translog cost function, pp. 355-357.)
Testing for functional form: Nested vs. non-nested tests in linear & nonlinear models (9/30) * Greene, William H. Econometric Analysis. 6th edition. New York: Prentice Hall, 2007. Pages 93104 and 152-155 (linear models); 175-180 (nonlinear models). (Or comparable material in 6th ed.)
Discussion: Forms of crop response functions (9/30) * Ackello-Ogutu, Christopher, Quirino Paris, and William A. Williams. "Testing a von Liebig Crop Response Function against Polynomial Specifications." American Journal of Agricultural Economics 67(1985): 873-880. (J) * Frank, Michael D., Bruce R. Beattie, and Mary E. Embleton. "A Comparison of Alternative Crop Response Models." American Journal of Agricultural Economics 72(1990): 597-603. (J) Tembo, G., B. W. Brorsen, F. M. Epplin and E. Tostão. "Crop Input Response Functions with Stochastic Plateaus." American Journal of Agricultural Economics 90(2008): 424-434.
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Cost functions, Links to duality, and Links between marginal analysis and budgets (JRB: 10/5-7).
* Debertin, Chap 4 and Beattie et. al Chap 4 ( cost functions) (Nicholson & Snyder, Chap. 10, pp. 323-357.)
7 * Hadrich, J. and T. Harrigan. Forthcoming. Costs of Alternative Manure Handling Systems vs Volume. Applied Engineering. * Debertin, Chap 19 (budgets) * Ohio State University. 2009. “2009 Ohio Enterprise Budgets.” http://aede.osu.edu/Programs/FarmManagement/Budgets/
Duality of Profit & Cost Functions (10/12-14)(JRB)
* Beattie, et al. Chap 6 * Greene, William H. Econometric Analysis. 6th edition. New York: Prentice Hall, 2007, p. 640ff estimation of the parameters of the translog cost function
Assignment 2 (10/12): Econometric estimation using duality (due 10/15) Economies of Scale and Scope (Multiproduct firms) (10/19) (JRB) * Besanko, D., D. Dranove and M. Shanley. “Horizontal Boundaries: Economies of Scope and Scale.” Chapter 2 in Economics of Strategy. 4th ed. New York: Wiley, 2007. * Schroeder, T. 1992. Economies of Scale and Scope for Agricultural Supply and Marketing Cooperatives RAE 20(2): 574-583 * Adams, R. M. et al 2004 "Scale Economies, Scope Economies, and Technical Change in Federal Reserve Payment Processing", J of Money, Credit and Banking
8 Getting Data Ready for Analysis (JRB)
Prescreening, diagnosing, and treating influential data points (10/21, 26) *Fox, John Applied Regression Analysis, Linear Models, and Related Methods, Sage 1997. Chap 11, 13 *Baum, Christopher. 2006. An Introduction to Modern Econometrics Using Stata. Chap 5. * Black, R. 2009. Notes and data samples. Assignment 3 (10/26): Data preparation and model design (due 10/29) Constrained Maximization and Linear Programming (LP) (SMS: 10/28, 11/2) * Paris, Quirino. An Economic Interpretation of Linear Programming. Ames, IA: Iowa State University Press, 1991. Chapters 1-2 (intro) and 9 (Lagrangean functions). * Hazell, P. B. R. and R. D. Norton. Mathematical Programming for Economic Analysis in Agriculture. New York: Macmillan, 1986. Chapter 2. (Optional: Model design in Ch. 3, Risk programming in Ch. 5.) URL: http://www.ifpri.org/pubs/otherpubs/mathprog.htm (Nicholson & Snyder, pp. 42-45 [also 37-41].) Risk in production models (SMS)
Overview of risk in production models (11/4) * Hardaker, J.B., R.B.M. Huirne, J.R. Anderson and G. Lien. Coping with Risk in Agriculture. 2nd ed. Wallingford, UK: CABI, 2004. Chapter 2. * Robison, Lindon J. and Peter J. Barry. The Competitive Firm's Response to Risk. New York: Macmillan, 1987. Chapter 2 (pp. 11-16).
Stochastic efficiency criteria and dominance analysis (11/9) * King, R.P. and L.J. Robison. "Risk Efficiency Models." Chapter 6 in P. J. Barry, ed., Risk Management in Agriculture. Iowa: Iowa St. Univ. Press, 1984. Pages 68-81. * Hardaker et al. (2004). Chapter 7.
9 Popp, M., K. Coffey, W. Coblentz, Z. Johnson, D. Scarbrough, J. Humphry, T. Smith, D. Hubbell, and J. Turner. "Empirical Analysis of Weaning and Pasture Rotation Frequency with Implications for Retained Ownership." Agronomy Journal 99(May-June, 2007):747-754. Assignment 4 (11/9): Risk management (due 11/23).
Risk-weighted utility analysis (11/11) * Robison, L.J., P.J. Barry, J.B. Kliebenstein, and G.F. Patrick. "Risk Attitudes: Concepts and Measurement Approaches." Chapter 2 in P.J. Barry, ed., Risk Management in Agriculture. Iowa: Iowa State University Press, 1984. Pages 11-30. * Hardaker et al. (2004). Chapter 5. (Nicholson & Snyder, pp. 202-213.)
Empirical risk analysis including stochastic programming (11/16) * Selley, Roger. "Decision Rules in Risk Analysis." In P.J. Barry, ed., Risk Management in Agriculture. Iowa: Iowa State University Press, 1984. Pages 53-67. * Hardaker, et al. (2004). Chapter 9. Hazell, P. B. R. 1971. “A Linear Alternative to Quadratic and Semivariance Programming for Farm Planning Under Uncertainty.” American Journal of Agricultural Economics 53(1971):53-62.
Discussion: Risk in production analysis (11/16) * Hardaker, J. B., J. W. Richardson, G. Lien, and K. D. Schumann. 2004. "Stochastic Efficiency Analysis with Risk Aversion Bounds: A Simplified Approach." Australian Journal of Agricultural and Resource Economics 48(2004):253-270. * Chavas, J.-P., J. L. Posner, and J. L. Hedtcke. "Organic and Conventional Production Systems in the Wisconsin Integrated Cropping Systems Trial: II. Economic and Risk Analysis 1993–2006." Agronomy Journal 101(2009):288-295. Musser, W. N., and G. F. Patrick (2002) "How Much Does Risk Really Matter to Farmers". In R. E. Just, and R. D. Pope, ed., A Comprehensive Assessment of the Role of Risk in U.S. Agriculture. Boston: Kluwer, pp. 537-556.
10 Production Models in the Study of Environment & Health Effects (11/18, 11/23; SMS)
Overview * Zilberman, David and Michelle Marra. 1993. "Agricultural Externalities," Chapter 6 in G.A. Carlson, D. Zilberman, and J.A. Miranowski, eds., Agricultural and Environmental Resource Economics, New York: Oxford University Press. Pages 221-267 (esp. 239-243, 249-262). Freeman, M.E. III. 2003. “Environmental Quality as a Factor Input.” Chap. 9 in The Measurement of Environmental and Resource Values, 2nd ed. Washington: Resources for the Future. Pages 259-276.
Linking biophysical simulation models with economic models * Benitez, P. C., T. Kuosmanen, R. Olschewski, and G. C. Van Kooten. 2006. "Conservation Payments under Risk: A Stochastic Dominance Approach." American Journal of Agricultural Economics 88(February, 2006):1-15. * Teague, Mark L., Daniel J. Bernardo, and Harry P. Mapp. 1995. "Farm-Level Economic Analysis Incorporating Stochastic Environmental Risk Assessment." American Journal of Agricultural Economics 77: 8-19. (J) * Antle, J. M., and S. M. Capalbo. 2001. "Econometric-Process Models for Integrated Assessment of Agricultural Production Systems." American Journal of Agricultural Economics 83: 389-401. (J)
Multiple attribute evaluation of environmental hazards and economic criteria Hoag, Dana L. and Arthur G. Hornsby. "Coupling Groundwater Contamination with Economic Returns When Applying Farm Pesticides." Journal of Environmental Quality 21(Oct.-Dec. 1992): 579-586.
Technology Adoption (SMS)
Overview (11/30) * Besley, Timothy and Anne Case. "Modeling Technology Adoption in Developing Countries." American Economic Review 83(May 1993): 396-402. (J) * Nowak, Pete. "Why Farmers Adopt Production Technology." Journal of Soil and Water Conservation 47(January-February 1992): 14-16. * Feder, Gershon, Richard E. Just, and David Zilberman. "Adoption of Agricultural Innovations in Developing Countries: A Survey." Economic Development and Cultural Change 33(1985): 255-298. (J)
11 Young, H. P. "Innovation Diffusion in Heterogeneous Populations: Contagion, Social Influence, and Social Learning." American Economic Review 99(2009):1899-1924.
Discussion topic: Alternative approaches to adoption research (12/2) * Byerlee, Derek and Edith Hesse de Polanco. "Farmers' Stepwise Adoption of Technological Packages: Evidence from the Mexican Altiplano." American Journal of Agricultural Economics. 68(August 1986): 519-527. (J) * Fernandez-Cornejo, J., C. Alexander, and R. E. Goodhue. "Dynamic Diffusion with Disadoption: The Case of Crop Biotechnology in the USA." Agricultural and Resource Economics Review 31(April, 2002):112-126. http://agecon.lib.umn.edu/cgi-bin/pdf_view.pl?paperid=22090&ftype=.pdf * Useche, P., B. L. Barham, and J. D. Foltz. "Integrating Technology Traits and Producer Heterogeneity: A Mixed-Multinomial Model of Genetically Modified Corn Adoption " American Journal of Agricultural Economics 91(May, 2009):444-461.
Technological Change (JRB: 12/7-9) * Varian, H. 2007. Inteermediate Microeconomics. “Index Numbers”. Pp. 129-133. * Layard, P. and A. Walters 1978. Microeconomic Theory. “Growth accounting”, pp . 289-292. * Coelli, T et. al. 2005. An Introduction to Efficiency and Productivity Analysis. 2nd ed. Ch 3 “Index Numbers and Productivity Measurement” * Griliches, Zvi. 2001. Issues in Agricultural Productivity Measurement.” In J. Alston et. al. Agricultural Science Policy: Changing Global Agendas, John Hopkins Press.
Synthesis: Matching Methods to Problems (SMS & JRB)
Oral presentations of term paper research (To be scheduled.) Final examination and term paper final drafts due: Friday, December 17: 7:45 - 9:45am. Room 119B Berkey Hall.
